Use of Risky Subordinated Debt
Widens in Lending for Start-Ups

By

Joshua Harris Prager Staff Reporter of The Wall Street Journal

Updated April 20, 1999 11:59 p.m. ET

FINANCING INSTITUTIONS are using a risky new tool for high-tech start-ups.

The emerging product is subordinated debt, or sub debt for short, which puts the lender behind the issuers of primary loans, including such senior paper as mortgages or leases. As a result, if the start-up goes under, the subordinated lenders must wait in line for their turn to collect on any assets.